As Microsoft chases after its entertainment ambitions, it risks alienating those who made its platform a success, warns Johnny Minkley

Late April, 2005. The NDA was signed and delivered, and I was waiting for the call from the US. Having foolishly failed to remember the connector for capturing an audio feed, I relocated to a quiet corner of the office on a different floor and carefully laid out two analogue tape decks next to the phone to record the conversation via its external speaker, just to be sure.

An embarrassingly backward way to discuss the future of gaming, perhaps, but that was my set-up when the call came in from chief Xbox officer Robbie Bach, who was about to reveal the name and the direction of the second phase in Microsoft's 20 year gaming plan, a few weeks before the official announcement.

"Microsoft's desire to widen the appeal of Xbox beyond the hardcore is clear enough. But at what cost?"

I was reminded of this interview when I read this week of some recent comments by Bach - now ex-box - reflecting on Xbox 360's stellar performance and how Microsoft ruthlessly capitalised on Sony's costly ball-fumbling with PlayStation 3.

"Some of the success of Xbox was due to the fact that Sony did some really not so smart things," Bach told a business audience in Seattle last week. "The transition to PlayStation 3 was really, really bad. And really hard. They mismanaged their partners, they mismanaged their cost structure. They made their next platform so complicated that developers couldn't develop for it."

At the same time, Bach recalled, Microsoft went on a full-blown charm offensive with key publishing partners, convincing them it wasn't in their best interests to continue to foster a market in which one format holder held all the cards.

It worked. And the likes of Activision and EA supported 360 "disproportionately to what they should have, mathematically." It also summed up Microsoft's early attitude to the games business.

The vast corporation had few friends and many doubters when it launched the original Xbox in 2001. As good as the hardware was, the company was forced to work tirelessly to win the hearts and minds of the trade and the core gaming audience so crucial to the platform's formative years.

This success-at-any-cost mindset ensured executives were far more open and approachable than the media had become accustomed to with Microsoft's lofty rivals. And for core gamers, it meant the HD experience out-of-the-blocks first, with a growing library of seriously impressive games and a best-in-class online service, making Sony appear flat-footed in its hubris.

Today, the global installed base for Xbox 360 sits officially at 67.2 million, particularly strong in the US and UK, and ahead of PS3 at 63.9m. The stuff, no doubt, of Bach and his colleagues' wildest dreams back in 2005.

But it's a position that also excludes the context of over 95 million Wiis sold, the steady rallying of PS3, and the explosion of smartphone, tablet and social network gaming.

"The vision of Kinect for gaming has remained beyond the frequently clumsy reality: nowhere more awkwardly underlined than with the canning of Peter Molyneux's Milo"

Microsoft's mantra at the dawn of this generation was "software and services", which has seen 360 steadily evolve to reveal the company's original, Trojan horse ambition of becoming the de facto entertainment hub of every household.

And this is where things may get a little sticky for Microsoft hereon in. Having fought and triumphed in a battle on a single front, it now finds itself embroiled in expensive skirmishes on all sides - with potential dangers in how it balances out its bets.

During that 2005 interview, I asked Bach why the console was called Xbox 360. Because it will "revolve around the gamer," he insisted. That was undoubtedly true in the beginning; but today an increasing number among its loyal gaming audience are doubting the sentiment.

Little by little, with the ad-and-entertainment heavy Metro dashboard, the relegation of games several tabs away, the burying of additional games content and the casting out of indie games into the digital wilderness, and the scrapping of Inside Xbox video content, Microsoft's desire to widen the appeal of Xbox beyond the hardcore is clear enough. But at what cost?

A gaming platform can no longer survive through the custom of core gamers alone. Kinect was Microsoft's great gamble to extend the life of 360 and capture the casual audience Nintendo engaged with so effortlessly. And, on the surface, it's been a roaring success.

Leaving little to chance, Microsoft staked a reported $500m on marketing Kinect and was rewarded with an astonishing 8 million sales in its first 60 days, making it the fastest-selling consumer electronics device in history.

It has the installed base, then, but do consumers still care about Kinect content? UK software sales suggest a dwindling of interest, with key first party-published titles such as Kinect Sports 2 shifting a third of what the original managed, and Dance Central 2 just a quarter.

Meanwhile, sales to date of 2012's flagship, massively hyped Star Wars release have not exactly set the galaxy alight. And eight times as many have bought Just Dance 3 on Wii as on Xbox 360.

With a few exceptions - such as the charming efforts of UK studio Frontier - the vision of Kinect for gaming has remained beyond the frequently clumsy reality: nowhere more awkwardly underlined than with the canning of Peter Molyneux's Milo and his subsequent departure from Microsoft.

Kinect 2.0 will have a bigger, more integrated role to play in the next Xbox, both in gaming and entertainment, where we may make it some way closer to that original, cheesy promise of "magic disguised as technology". It remains hard to envisage how it will gel seamlessly with a core gaming experience - but that was possibly never the point.

Having successfully taken the game to Sony this generation and broadened the scope and reach of Xbox, then, Microsoft finds itself pulled in several directions at once and is starting to show the first signs of strain.

To come from nothing to where it is today in the console space in a little over a decade is a stunning achievement by anyone's reckoning, testament to how much Microsoft got right along the way in philosophy and practice.

But not even the mighty techno-seers of Redmond can afford a working crystal ball. After all, in 2005 Bach also told me: "Nintendo is a really great company but, with respect, a great toy company. I think they'll do great in that niche, but this isn't about the toy business anymore. This is the mainstream entertainment business". Some niche.

"With so much uncertainty over where the console business goes from here, platform holders need their loyalists and evangelists more than ever"

Last week, Bach compared Xbox 360's battle with PS3 to Microsoft's attempt to take on Apple with the ill-fated Zune. The latter failed horribly in part since, where the company was able to pounce on Sony's blunders, Apple simply did not make any of consequence. "They have made very, very few mistakes over the last 10 years," he noted ruefully.

And Apple, needless to say, is now a huge competitor in the gaming space, with a product and service neither of which existed when Bach first shared his vision for Xbox 360. Soon, too, in the growing battle for the living room, with the Cupertino firm's long-rumoured smart TV likely to prove a powerful obstacle to Microsoft's wider entertainment goals.

With so much uncertainty over where the console business goes from here - indeed, where it even fits into the entertainment landscape of tomorrow - platform holders need their loyalists and evangelists more than ever as a solid foundation in a rapidly changing world.

Microsoft should think carefully before doing anything further to alienate them in the hasty pursuit of its ambitions. Having come so far on the back of others' errors, it now risks making itself vulnerable through its own.

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I was a day one 360 buyer and a luanch original Xbox buyer but unless the new Xbox is significantly more powerfull or has a release date much earlier than the PS4 I wont buy one, particully if kinect is forced on me.
The main reason is having to pay for Xbox live, sony's PSN suits my purposes fine and is free.The loss of revenue from licensing royalites from games I have bought on PS3 Vs. 360 for the free online would far outway any monnies MS would have gotton of me in XBL fees.
The only other reason to buy a nextbox would be exclusives but for every Halo theres a Killzone or Gran Turismo for a Forza Etc.

To be honest, I'm of the opinion that all three manufacturers are going to suffer/struggle in the next generation. Partly due to the economic situation but also partly due to the fact that differentiation is going to be difficult.

What I mean by that is that the "casual" mass market that has exploded onto the scene with the Wii (and now kinect) really don't have a long-term interest in expensive consoles and games. The majority would not see the point in buying another excer-sports game when they already have one that's pretty much similar. Motion control is no longer new and exciting any more. On the other front the "hardcore" gamers who are loyal to a brand might jump on and buy their console of choice however, other "core" gamers are going to struggle to justify forking out for the expensive consoles that play games that are essentially the same as current generations and/or the PC.

Marketing a slightly improved fps, resolution, motion interface and (as if we'll see this, but hey, I can dream, right?!) AI is very difficult. I think Nintendo sort of dropped the ball when they didn't make their tablet controller completely detachable from the main console. I realise there's a cost in that upgrade but I think the gamble might have paid off in a world of iPads and whatnot...

Microsoft's key advantage is Xbox Live. People have lots of friends on it, they have gamerscores and achievements logged on it, and I'd expect the next Xbox to be back compatible with existing XBLA digital content. That gives them momentum, as gamers have invested a lot of time and money in their ecosystem and it should all carry across to their next console.

Their problem at the moment is Kinect. Software sales have dropped sharply, with some big new titles performing poorly and sequels to popular launch titles falling well short of the original games' sales. Also, it's only this year we're going to start to see more core games on Kinect. Probably the best use of Kinect for core gamers so far is being able to shout "fus ro dah" at your console in Skyrim, something which would work just as well with a cheap headset. Meanwhile a lot of the core gamers that made Xbox 360 a success in its first few years are (rightly or wrongly) feeling neglected.

If Microsoft do bundle Kinect 2 with the next Xbox, as rumours have suggested, it's going to mean either incurring bigger losses, driving up the launch price, or cutting corners in other areas of the console's design. I think they still need to convince core gamers and early adopters that Kinect is worth that cost to them and can add something to core games.

Right now I think Microsoft's biggest problem pertaining to the core audience is their reluctance to invest in new IPs. I mean, Halo, Fable and Forza are all solid franchises with good sales figures, but that's just about it as far as Microsoft's current in-house non-Kinect, non-Live IPs go. How about they partner with some development studios and get, I don't know, a new action-adventure in development, or revive a couple of old IPs like Banjo and Brute Force.

They are, in my opinion, focusing on Kinect to the detriment of core gamers, and unless they prove how important core gamers' money and loyalty is to them - lest we forget how fickle the 'casual' market is - I can see a lot of people switching back to Sony next generation. They need someone like Peter Moore or J Allard back in charge. It never really seemed like Molyneux had any real creative freedom there (whether through his own choice or his bosses'), and I suspect Harrison has been brought on board to improve the outlook for Kinect.

One thing I do wonder, with the xBox supporting more media apps, is if MS might actually leave the 'games' thing behind altogether, including losing MS Games Studios.

You could argue (and, to an extent I am arguing) that Microsoft working so hard to get Netflix, TV channel-operated catchup services (iPlayer, 4oD), Crackle, Last.fm etc on board is less an attempt to position xBox as a catch-all media device, but a concession that Zune hasn't worked, moving the burden of running a media business (ie, dealing with rights acquisition, advertisers etc) to third parties and then creaming a small amount of money off the top.

The Xbox 360 is still the top selling console in the U.S. and I believe the U.K. I think it comes down to momentum and Xbox Live features, as a couple other people have said. That clearly means more to consumers than Sony's first party lineup, as extensive as it is. Probably the most significant core software decision they've made is locking up Call of Duty content exclusive to the Xbox 360 for a limited time.

However, I think console sales for this generation are slowing down. They probably need something like Kinect to bring in consumers for the next generation and Microsoft will continue to straddle the line between core and casual and make the Xbox 360 as more of a platform for entertainment experiences, rather than a box purely for gamers alone.

I don't see how core gamers are being alienated, they're (or should I say we) are being provided options that perhaps we don't want. I own a Kinect and I've used it twice; both times drunk. I've zero interest in it's software but why shouldn't MS provide it?

The extras such as media handling (i.e. netflix, lovefilm, Sky TV, etc) are also welcome to many and I'd put money on hardcore gamers actually using these features. If not, it's hardly getting in the way of what, a few menu clicks?

The nature of the console market has meant that original IP is on the decline. It's a big risk to produce a AAA title and for it to flop; both financially and from a customer loyalty basis. Apple, and the other smart phone/tablet manufacturers don't come into play in this market either. They are not aimed at hardcore gamers and never have been.

MS haven't reduced support at any point and yes, dev houses come and go. That's been the case forever.

I truly hope that Microsoft don't go down the same route as Sony has with the PS3, ie turn a gaming console into a media centre.I, like many people in the UK have Sky+ HD, I have no need for a bluray player, or a media centre, The one and only bluray film i've watched was the copy of casino royale that Sony sent me when I bought my day one PS3 (which has sinced died and was not repaired for free!)

I also cannot understand why some people say they dislike XBL because it has a subscription cost, that subscription can be bought easily online for around £26:99 from a lot of places, thats £0:52 a week or £0.07p per day, not a lot to pay for a superior online gaming experience with party chat thats not bound by everyone being in the same game ;)

Lets hope the X360 keeps its roots in gaming and does not become watered down gaming experience just so that it can also cope with being a media centre..

The news Apps on XBL are used by some people, i rarely see anything other than games being played by the 98 friends in my XBL friends list, and although as said they are only a few menu clicks away, that does become annoying if you don't use them, turn on the X360, go into dashboard and then the first tab should be Games..

It's not so much providing more options Graeme as shifting their focus that's the issue. It's been well-reported how the games tabs have been buried on the Metro dashboard while advertising and non-gaming apps are given centre stage, and MS's first-party releases or third-party exclusives have been pretty thin on the ground (Live aside, but I'd wager games on Live and PSN don't sell hardware) for some time now, excepting a trickle of Kinect stuff.

Their transition over the span of this generation for fighting tooth and nail for the core gamer to whoring themselves out to the casual crowd has been quite a shift in priorities.

"To come from nothing to where it is today in the console space in a little over a decade is a stunning achievement "

I'd argue that actually, it isn't that great an achievement considering what Sony did with the PS1, and how Nintendo have dominated, lost out, and dominated again. If anything, the Xbox's rise has been a long slog that would have been impossible to sustain had it not been for the financial foundations offered by MS's other products.

MS is at a dangerous crossroads, but I'm not sure they even realize it, or give it credence if they do.
MS tends to be hipster driven, their marketing always showing upper middle class playing games in a modern nice living room wearing clothing they bought at old Navy. It's almost like Pat Boone is in charge of their marketing by the way they dress. I'm not sure if they realize that their marketing isn't cool, but they need to for the next gen. Sony markets a lot less hipster with more of an edge, and Nintendo is always family marketing. I mention this because I feel if Sony can release a powerful box, with edgy marketing, they would have a great chance at the hardcore gamer. I'm betting MS will go the safe hipster route they have been going, with Kinect 2.0 sold with every unit, Lots of media options, and a less powerful console. I hope I am wrong, we shall see...... I can think of some great marketing ideas for MS, surely the marketing geniuses out there can do better than what they have been doing.

MS must realize they NEED to be the box people want to play Call of Duty (or whatever is next) on as it has the best graphics, best features, and not just the best network. Sony is going to catch up to XBL in the important ways very quickly. If they go crazy about Kinect 2.0 at the expense of powerful Hardware, they will probably pay hard for that decision.

MS also needs to reward Gold members like what Playstation Plus offers. MS's sales are usually lame, and they rarely give anything away. Some of us might pay a bit more for better rewards, but it has to be worth it. MS could take a note from Steam, where I am tempted to spend money far more than on XBL. Steam always has tempting offers, I hardly ever feel tempted by XBL.

I want to be excited about the next xbox, but I will favor who has the most powerful box. If they are fairly equal I would go with Xbox again, but if they really skimp on ram, CPU/GPU, I will go with who ever is most powerful. I am usually an early adopter, and who I buy first gets the most support. Don't let us down MS!! (Sony, pull off a great powerful system, and I may just switch sides)

This is why I still love my simple disc-based gaming. It doesn't matter what MS do to the dashboard they can screw it up completely for all I care. Also long as when I stick a disc in it boots the game then the rest doesn't matter.... :p

I like your comment Kieren. I just wish gaming could still be that simple. Unfortunately this vying to control a market's demographic seems to have taken over and it'll be a wonder if you can just pop in a game and play it, given all the restrictions we keep hearing about for the next-gen, coupled with MS's obvious aim for the casuals.

While casual consumers probably don't mind the short-term roadblocks (online passes, disc-locked content, etc.,) I usually like to think 10 years down the road whether that game will still be playable...and if games require dashboards in order to play them, or a Kinect recognition feature to access them, then yeah we might want to start caring about what they plan to do with these core features moving forward.

Interesting read. I don't think what MS is doing or what 360 is experiencing is any different than what's happened to other successful game consoles. As they age and their install base grows, their audience broadens. It's only smart to both serve and try to grow that segment. That doesn't mean core gamers who are on it are going anywhere, not as long as there's games geared at them and not until its next iteration or next-gen competitor comes out. I don't think anyone's handing down the 360 to little bro/sis just yet, not with what's slated for core games this coming fall.

I know I don't have stats to back this up and I can mainly relate to myself, but I think this year is going to be the year of the PC. I mean, except for a few exclusives, a lot of former Xbox hardcore gamers are probably going to move to PCs if they haven't already. PCs nowadays are both powerful and cheap, and consoles getting less and less user-friendly while PCs are more and more a breeze to use and game on.
It takes me less time to download and play a game on Steam than installing the disk on my 360, just saying.

I feel the XBOX is offering less and less games to the core gamer, and is currently offering a watered downed family/Nintendo centric type experience (to broaden its appeal). Thats fine, but I hate the pro kinect driven titles. Absolutely have no interest in kinecting (at the moment)

And with most games having a multi platform, agnostic approach - chances are as a gamer, I'd probably stick with the PC/MAC/Ios and next gen platform that can deliver good solid titles of indie, adventure and core.

3D and kinect - I'm still parking those to one side (as a unmatured realization for now)

One worry for the core developers is, their next box should not be a dreamcast...

The problem is, which has been mentioned before, is that Microsoft probably aren't even aware of what they are doing. Look at E3 last year!

E3 this year will be a big indication to what direction Microsoft is heading with the next console - mainly by showing what is on the horizon over the next year and a half for the xbox360.

Sony will capitalise on this. They'd be stupid not to. They have been pushing the PS3 to a more hardcore market more and more over the past few years (even Move has been incorporated in a lot of hardcore games (Resi 5, Bioshock Infinite).

We won't really know til they announce the things, but E3 will be a very good indicator into which direction each of them will be heading.

If Microsoft just focus on making Games, some core games and some casual games, they will do well next generation.

the worst thing they could do is trying to ditch the core gamers that made the XBox360 the thing it is today and instead go for an completely Kinect gaming platform, and soon you will find that they not only have an expensive hardware but also having software that is virtually unplayable.

The next gen XBox still needs the traditional controller, just as the Nintendo Wii used the Classic Controller to play the timeless games that you won't be able to have the same play control no matter with all the Wii-Motion Plus technology could be pumped out.

Big, bulky black and green thing it was with fin grill things where there wasn't even any grills and a green matrix-esque interface, there was always a grown up menacing look about it. It was the stuff of hardcore gamer dreams, especially with the PS2 interface reminding me of Rayman 3 more than anything. Xbox became less surreal and more 'built for the living room' than the XBox but was still hardcore and grown up.

To say it like Duke Nukem would (despite its stereotype), the Xbox wasn't something your wife would pick for the kids. It just isn't meant to feel like a 'family' console and this entire attempt to make it all 'multimedia' is akin making the aforementioned Duke get a boob job. In other words you've taken an idea that is usually a good one, and applied it to the wrong item.

In essence you are making the Xbox more PS3 like and what you should be doing is making it less PS3 like while taking the things that sold the PS3 as a console, like it's bluray player.

Don't get me wrong, PS3 is cool, and netflix, iPlayer and so on are welcome additions to the console, but a multimedia player isn't cool, a HTPC isn't cool, a bluray player isn't cool. Xbox won out because it was really really cool, if in a somewhat geeky way, 360 won out because they made it less geeky but sell cool, but making it a multimedia device will undo everything they ever worked on.

I was a big supporter of Xbox - however after myself and my family were no longer playing games on it - I got a PS3 and we all agree its like having a games console again.

The new Xbox dashboard is too distracting and the cost of live! is to high to warrant 4 different accounts simply for each of us to have our own gamer score. Most other people agree - the Xbox now simply sits below the TV collecting dust and they have moved back to the PC(as I have) or bought a PS3(Rest of my family)

That is what gamers want. It is what the big publishers want. I hear it from our readers day in, day out.

If Microsoft wants to bang that square peg into the core gamer's big round face, I cannot predict what the consequences might be, only that it will likely not result in a positive outcome. Casual, family gamers aren't interested in Gears Of War; you sell most of your consoles to them, they bring it out at Xmas to play Kinect Sports and do not buy new games. The Wii has proved you can sell a lot of consoles to this market, but it's also proved that said market does not support the console.

It's a classic business mistake: alienate customers you do have – the fans, the people who made it a success – in the act of chasing customers you don't. MS needs to take a good long look at what it's doing. This is a dangerous time for Xbox.

You do not see Apple announcing their next iPad to have as standard a mahogany finish in order to attract the 70-90 year old bracket. You do not see it because Apple gives its current customers what they want and relies on positive word of mouth to increase the size of that core audience. The core gaming audience is growing; there is simply no need to try to convince mums to play Halo, any more than there's any need to convince the 14-40 year old core gamer that what they really should be doing is dancing with C3PO.

I have to say that Dan Howdle is right on with his assessments, as are others here that pretty much say the same thing, myself included. His analogy of banging that square peg into a round hole is exactly how I feel about what MS is doing.

What Andrew said above is right on as well. I bought the original Xbox because it looked powerful, felt powerful, and wasn't trying to be like the gamecube, which no one I knew bought at the time. That hardcore image transfered to the 360 and the games that sell the most and are most popular on Live are the hardcore titles. This pandering MS is doing to casual and family gamers is in my opinion the wrong way to go. It's great that 360 and the successor gives us family options, but not at the expense of the hardcore image.

Jeremie, interesting thought you have there about hardcore console gamers moving to PC. In fact, I'm just trying that myself. I've been a long-time PS3 user (and PS2 before that), but given that everything will change come the next generation, it's my chance to consider switching, isn't it? So I picked up a cheap but reasonably healthy PC (an LGA155 / GTX 560 SE system, which is several times the power of either of the current consoles, can be built for well under $500, though Windows 7 will add another $100 or so to that if you need it), joined Steam, and I have to say that driver and controller issues aside, I'm liking it. Even old games like Half Life 2 look at lot better on this hardware than they ever did on the console. And Steam is a breath of fresh air after dealing with PSN for so long.

If Valve can just get Steam sorted to have an interface usable mostly with a game pad, it's going to feel enough like a console that I may never go back.

I was always a PC tinkerer, and had friends I'd go and see with Unreal Tourney and so forth, but I have to say, I didn't move completely until after I got my Xbox, played Halo 3 and ODST, decided that as good as GoW was the first time, it was slow, clunky and had an aiming reticule half the size of the screen and I wasn't going to bother with 2 and 3.

Its a shame really becasue if it wasn't for piracy dismaying a lot of publishers and devs then I think PC would have won out ages ago. I mean Xbox 1 was just a standardised PC at the core right? Start selling mid-level gaming PCs at the £400 price mark and you could have the whole industry back again, especially with Sonys failure of a 10 year lifecycle and MS's current set top box dreams.